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Cummins Diesel Sales Service (India) Ltd. Vs. the Director General of Supplies and Disposals, New Delhi - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 49 of 1973
Judge
Reported inAIR1981Delhi61; ILR1981Delhi205
ActsArbitration Act, 1940 - Sections 20
AppellantCummins Diesel Sales Service (India) Ltd.
RespondentThe Director General of Supplies and Disposals, New Delhi
Advocates: C.M. Oberoi and; I.S. Mathur, Advs
Cases ReferredUnion of India v. Maddala Thathaiah
Excerpt:
.....section 20--arbitration agreement--territorial jurisdiction whether of court in whose jurisdiction rate contract is concluded--or whether of a place where each supply order is placed.; in the instant case the appellant company was dealing with the sales and services of cummins diesel engines in india. the company was supplied spare parts by cummin engine company, u.k. and cummins engine company, u.s.a. under a rate contract dated 7-5-1965. this contract expired on 31-12-1965. on 1-6-1966 the appellant informed the respondent-director general of supplies & disposals (d.g.s. & d) that a new rate contract should be concluded immediately. the proposal of the appellant was accepted by the respondent vide letter dated 25-10-1966 subject to certain terms and conditions including term..........separately communicated to you. . . . . 'this shows that supply orders had to be placed under the rate contract, but the contract was otherwise complete except for the quantities to be supplied. the contract also had a minimum quantity of goods, i.e., rs. 1,000 which had to be supplied under the contract even if no further supply order was placed. in other words, the contract was for the supply of spare parts worth rs. 1,000 plus any other goods that might be ordered under the supply orders to be placed under the contract. it could not be described, thereforee as a mere offer. (16) this is the first point on the question of jurisdiction. (17) secondly, if 'the acceptance of tender' is taken to be the supply order as is contended by the respondent and which argument has been accepted by.....
Judgment:
ORDER

Sagainst the Rate Contract shall be accepted by you on the basis of your manufacturers' net ex-works prices (in Dollar/Pound) as shown in their parts price-lists current on 1-11-66. The net F.O.R. Destination selling prices will be arrived at by multiplying the net ex-works prices by the Rupee conversion factors as based on the break up agreed to by you which will be separately communicated to you. . . . . '

This shows that supply orders had to be placed under the rate contract, but the contract was otherwise complete except for the quantities to be supplied. The contract also had a minimum quantity of goods, i.e., Rs. 1,000 which had to be supplied under the contract even if no further supply order was placed. In other words, the contract was for the supply of spare parts worth Rs. 1,000 plus any other goods that might be ordered under the supply orders to be placed under the contract. It could not be described, thereforee as a mere offer.

(16) This is the first point on the question of jurisdiction.

(17) Secondly, if 'the acceptance of tender' is taken to be the supply order as is contended by the respondent and which argument has been accepted by the learned Single Judge, we will be left with this difficulty that each supply order placed under the rate contract will have to be deemed to be an acceptance of tender. But, the supply order does not contain any terms and conditions, but refers back to the rate contract. If the rate contract is not a contract, then we will have to determine, what is the document Exhibit D-9. Exhibit D-9 is a letter issued by the office of the Director General of Supplies & Disposals containing a number of terms on which the offer has been accepted. If it docs not constitute a contract, it will be not capable of being performed. It is contended by learned counsel for the respondent that this is an offer, but this is unacceptable because this is a document written on behalf of the purchasers and not on behalf of the contractor. The purchasers cannot accept their own offer, so if we take the supply order to be the acceptance of tender, we reach the result that there will be more than one acceptance of the tender but there was no tender, this is so, because Exhibit D-8 written by the purchaser was a mere desire to alter the previous rate contract. This is an impossible result and seems to be illogical.

(18) The inevitable conclusion from the facts of the present case is that the contract consists of three documents. An offer made by the contractor, i.e., the present appellant to supply Cummins Diesel Engines under a rate contract on certain terms and conditions which was accepted by document Exhibit D-9 on certain other terms and conditions specified therein. This acceptance brought about a contract fixing the rates and prices and the period for which goods could be ordered but did not specify the exact amount that may be later ordered under the same except that it guaranteed that goods worth Rs. 1,000 would be ordered. It was, thereforee, a specific contract as regards goods worth Rs. 1,000 and a non-specific contract regarding other goods which could be ordered later by the purchasers. The third document is the supply order, which brings about a specific contract. The three documents together constitute a contract. The question of jurisdiction does not depend on when the contract was completed, but on what the parties have said regarding the Court which will have jurisdiction in the matter, That Court is specified in clause 20(3) of the terms and conditions in the pamphlet already referred to. The Court is the Court from where the acceptance of tender was issued. Whether the acceptance of tender concluded the contract is not the question, because even if no order is placed under the rate contract, there can be disputes regarding the same, particularly as goods worth Rs. 1,000 are guaranteed under the rate contract itself. The jurisdiction is determined by the acceptance of tender. When a specific contract or supply order is placed in consequence of the rate contract, then a dispute regarding that specific contract is to be decided by arbitration and, for the purpose of that arbitration, the jurisdiction of the Court is of that Court which has jurisdiction over the place from where the acceptance of tender is issued. That happens to be Delhi, so the Delhi Courts have jurisdiction. We, thereforee, hold that the Delhi High Court does have jurisdiction.

(19) Now turning to the 4th issue, which is the question as to whether there is a specific contract, it may be observed that the learned Single Judge held that there is a specific contract resulting from the placing of the supply order. This conclusion is challenged by learned counsel for the respondent on the ground that the supply order is for more than Rs. 5,00,000 and is, thereforee, greater than specified under the rate contract. It may be noticed that this contention is contrary to the contention of the respondent under the third issue when it was urged that a specific contract was brought about by the supply order. However, it is to be noted that the point raised on behalf of the State of U.P., is that the supply order was not competent under the rate contract. This itself is a dispute arising under the rate contract and being a question arising out of the contract has to be decided by the arbitrator and not by the Court. It is well-settled that any dispute relating to the interpretation of the contract or any question arising in connection therewith is a matter which requires recourse to the contract and, thereforee, is a question to be decided by the arbitrator [reference Heyman v. Darwins (1942) 1 All. E.R. 337. This being not a matter which this Court has to decide, we only note the contention but do not decide the same.

(20) In connection with the points raised before us, it is now necessary to refer to -a judgment of the Supreme Court which was cited before us. This is Union of India v. Maddala Thathaiah, : [1964]3SCR774 . In that case, the General Manager of the Madras and Southern Mahratta Railway had invited tenders for the supply of jaggery to the railway grain shops for which a tender was submitted which was in the nature of a tender similar to the one in our case. It was held by the Court that the acceptance of the tender regarding the supply of jaggery, though it was definite in regard to quantity and period, was not a complete legal contract as the date of delivery was not specified. It would be an agreement but not a legal contract. The actual placing of the order, after the tender was accepted, constituted the complete contract. The Court's observations were as follows : '

WEare, thereforee, of the view that the condition mentioned in the note to Paragraph 2 of the tender or in the letter, dated February 16, 1948, refers to a right in the appellant to. cancel the agreement for such supply of jaggery about which no formal order had been placed by the Deputy General Manager with the respondent and does not apply to such supplies of jaggery about which a formal order had been placed specifying definite amount of jaggery to besupplied and the definite date or definite short period for its actual delivery. Once the order is placed for such supply on such dates, that order amounts to a binding contract making it incumbent on the respondent to supply jaggery in accordance with the terms of the order and also making it incumbent on the Deputy General Manager to accept the jaggery delivered in pursuance of that order.'

This judgment is in full accord with what has been observed above. The making of the tender and the acceptance of the same without specifying anything further would make the contract an indefinite contract and not a complete legal contract. Once an order was issued under the accepted tender, then it would become a specific contract. On the facts it may be observed that there was in that case a programme by which the jaggery had to be delivered, i.e., 3,500 maunds on 1st March, 1948, 3,500 maunds on 22nd March, 1948, etc. On 8th March, 1948, the Deputy General Manager had informed the respondent that the balance quantity of jaggery be treated as cancelled and the contract closed. The contractor had instituted a suit for recovering damages for breach of contract. The trial Court dismissed the suit, the High Court however held that the clause reserving the right to cancel the contract was void and remanded the case for disposal on the merits. Before the Supreme Court, it was urged on behalf of the railway department that the contract was for the supply of an unspecified quantity of jaggery up to amaximum of 14,000 maunds and there was thus no enforceable obligation to purchase the entire quantity. The Supreme Court held that any supply order which had already been placed could not be cancelled and only the un-ordered supplies could be cancelled. The contract was, thereforee, an enforceable contract.

(21) As observed by us, we are not concerned with whether the contract is an enforceable contract at this stage. We are concerned with which Court has jurisdiction. On that the clear indication in the agreement is that the place where the tender is accepted is the proper Court and the only Court. As to whether there is a binding contract as a result of the supply order, or, what are the rights of the parties under the supply order, these questions have to be raised before the arbitrator because it turns on the terms of the contract.

(22) In the result we accept the present appeal and direct the filing of the arbitration agreement. In accordance with the terms of the arbitration agreement, we direct a reference to arbitration of the disputes which have arisen between the parties, to an arbitrator to be appointed by the Director General of Supplies and Disposals. The said appointment should be made within three months from today. A copy of this order maybe communicated to the Director General of Supplies and Disposals to be acted upon. The Director General of Supplies and Disposals will refer the disputes to the arbitrator to be appointed by him. The appellant will get costs throughout.


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